The Montrose Case - A Model Loss in Progress Rule Analysis

04/08/2010

The term "progressive loss" refers to a loss that arises from injury or damage that occurs over a long time period. A progressive loss might include injury or damage caused by continuous exposure to carcinogens like asbestos, toxic waste that gradually seeps into surrounding soil, or continuing damage caused by construction defects, for example. Issues involving progressive losses often arise in the insurance context because a loss might extend over the effective periods of multiple insurance policies. In other words, damage or injury might begin occurring under one insurance policy and continue to deteriorate over the term of several subsequent policies. Thus, disputes often arise regarding which of the several insurance policies the damage or injury triggers, and how to allocate the costs of covering the insured's losses that arise out of the progressive loss among the triggered policies.

This article discusses the loss in progress rule in Texas, particularly how it applies in the third-party liability insurance context. It is the author's opinion that Texas courts have not correctly applied the loss in progress rule in this context. Thus, this article will first discuss the loss in progress rule in the liability insurance context using the comprehensive, clear analysis applied by the Supreme Court of California in Montrose Chemical Corp. v. Admiral Insurance Co. as a guide. Then, this article will review the line of Texas cases establishing the current loss in progress analysis applied to third-party liability insurance, which demonstrate how Texas courts have "missed the point" along the way. Finally, based on a review of Texas cases, this article will discuss the worrisome practical implications of the Texas loss in progress analysis by applying the Texas and Montrose analyses to a real-world example.

Excerpted from chapter 14 of State Bar of Texas 7th Annual Advanced Insurance Law Course, April 8-9, 2010. To read the full paper click on the PDF linked below.

PDF - Montrose_Case_Progress_Rule_Analysis.pdf

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